SDN Isn't Growing Networking, It's Slowing It Down

Software Defined Networking (SDN) offers the promise of a more agile and responsive networking infrastructure. But this promise isn't necessarily directly translating into revenues, as service providers around the world are now hesitating on buying decisions, according to Infonetics Research.

"Last quarter, we identified the 'SDN hesitation,' where we believe the enormity of the coming software-defined networking and network functions virtualization (NFV) transformation is making carriers be more cautious with their spending," Michael Howard, principal analyst for carrier networks and co-founder of Infonetics Research, said in a statement. "This hesitation reared its head in the first quarter of 2014, where global service provider router and switch revenue increased only two percent from the year-ago quarter."

Infonetics' first quarter 2014 (1Q14) Service Provider Routers and Switches report overall shows a downward trend for revenues. The global market for IP edge, core and carrier Ethernet switches generated $3.2 billion in revenue for the first quarter of 2014, a 13 percent sequential decline from the fourth quarter of 2013.

Cisco is the top vendor in the world, with Juniper coming in second. Alcatel-Lucent holds down the number three spot, while Huawei is now fourth.

In terms of a five-year outlook, there is still growth ahead despite potential SDN hesitation. For the five-year period of 2013-2018, Infonetics is forecasting a Compound Annual Growth Rate (CAGR) of 0.7 percent for Carrier Ethernet switches, 2.9 percent for core routers and 4.3 percent for edge routers.

"We believe the current generation of high-capacity edge and core routers can be nursed along for a while as the detailed steps of the SDN-NFV transformation are defined by each service provider-and many of the largest operators in the world are involved, including AT&T, BT, Deutsche Telekom, Telefónica, NTT, China Telecom, and China Mobile," Howard stated.

Infonetics' numbers look at the global service provider marketplace. Other firms have previously forecast large potential for SDN technologies, particularly in the enterprise space. In 2012, IDC forecast that the SDN market would generate $3.7 billion by 2016.

Earlier this year, Brad Casemore, research director at IDC, noted that early adoption of SDN has also been driven by network requirements for better multi-tenancy and isolation support, as well as the need for improved automation of network provisioning. Cost reduction is not a key driver for SDN deployment. An IDC study noted that only 4 percent of the study's respondents said that the need to lower capital expenditures is a key driver for SDN deployment.

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.